Further reforms planned for Chinese SOEs

Chinese state-owned enterprises (SOEs) in steel, coal and power are to be restructured by the State-Owned Assets Supervision and Administration Commission (SASAC) to improve their operational efficiency and profitability.28 Feb 2017

SASAC is keen to reduce overcapacity, and deal with low commodity prices and financial losses through reorganisation and reforms to allow mixed ownership of the businesses, the Chinese state council said.

Other sectors including petroleum, gas, railways, telecoms, civil aviation and defense will also see mixed ownership reforms, the council said, citing SASAC minister Xiao Yaqing.

The Chinese government will invest in improved management and operations in unprofitable SOEs, Xiao said, as well as reducing the number of 'zombie' companies. Zombie companies are economically unviable businesses that only survive due to financing from the government and banks. They are usually in industries with severe overcapacity, the council said.

The government has reorganised 22 central SOEs, including China Ocean Shipping (Group) Co and China Shipping Group, CNR Corp and CSR Corp, over the past three years. It also established new businesses such as AECC Commercial Aircraft Engine Co and China Tower Corp in 2016 and 2014, respectively, the council said.

So far, China has set up more than 200 funds worth more than 600 billion yuan (£69 billion) to support SOEs and private companies, it said.

The 350bn yuan (£40bn) China Structural Reform Fund was initiated by China Chengtong Holdings Group, a state-owned asset-operating company that has been involved in reorganisation of SOEs. The fund will be managed by SASAC and will be used for mergers and acquisitions, industrial upgrades and innovation.

Under the new guidance, China's state capital will no longer be invested in some SOEs, while others will be restructured or upgraded, state-owned news agency Xinhua reported. The released capital will be invested in major infrastructure, "forward looking and strategic" industries, in the industrial supply chain, and in "firms with strong competitiveness", it said.